When starting a business in Missouri, deciding whether to form a corporation, limited liability company (LLC) or some other type of business entity is one of the first legal issues you will encounter. It is also one of the most important, as the type of entity you choose can have significant implications for your income tax liability, your rights as a co-owner (if you have one or more partners), business succession plans in the event of an owner’s retirement or death, and your exposure to personal liability in the event of a lawsuit against the company. Your choice of entity (and how you structure your entity) can also make your company more or less attractive to outside investors, so it is not a decision to be taken lightly.
As you begin to weigh your options, our Springfield business lawyer notes that there are four key considerations to keep in mind.
4 Key Considerations for Forming a New Business Entity in Missouri
1. Choice of Entity – Our Springfield Business Lawyer Can Help You Decide
While corporations and LLCs are the most widely-used and most well-known types of business entities, they are not the only options you have available. You also have the option to operate as a sole proprietor or partnership; and, depending on the nature of your business and the jurisdiction where you choose to form your business entity (more on this below), your options may also include:
- Limited Partnership (LP)
- Limited Liability Partnership (LLP)
- Limited Liability Limited Partnership (LLLP)
- Professional Association (P.A.)
- Professional Corporation (P.C.)
- Professional Limited Liability Company (PLLC)
2. Limitation of Liability
One of the key benefits of forming a corporation or LLC (or other “limited liability” entity) is that it can protect your personal assets from the company’s debts. If you form and manage your entity properly, your company’s creditors (including any judgment creditors) will only be able to look to the company’s assets for payment.
3. Ownership and Control Rights
Different types of business entities offer different ownership structures, and the amount of flexibility you need may go a long way toward determining which type of entity is best for you. If your goal is to secure outside investment, you will likely want to choose an entity structure that allows for multiple classes of shares.
4. Tax Implications for Missouri Businesses
If you form a “C” corporation, you will be subject to two levels of income tax – a corporate tax and a personal tax. While this may not initially sound like an attractive option, there are various circumstances in which this can actually minimize your overall tax liability. The other types of business entities are generally subject to a single level of income tax (although it is possible to make elections for different tax treatment), and you will want to make sure you make an informed decision about the tax implications of your chosen business structure.
Seek Legal Guidance From Our Springfield Business Lawyer Today
If you have questions or concerns about which type of business formation may be best for your purposes, do not hesitate to contact a Springfield business lawyer at our office to discuss your options.